Is It Surprising or Strange That Conservatives Oppose Carbon Taxes?

by Reihan Salam

I recommend reading Ezra Klein’s recent take on the history of efforts to address climate change and Jim Manzi’s 2008 article on “Conservatives, Climate Change, and the Carbon Tax” back-to-back.  

Ezra writes the following:

Addressing climate change by pricing carbon — an idea Brooks supported then and supports now — was a bipartisan project in 2003. It became a partisan project because Al Gore thought it was important enough to make a documentary about. Republicans began opposing efforts to price carbon, in part because they hate Al Gore. That left funding renewables research as the only avenue for those worried about climate change. Funding renewables research means funding some projects that won’t work out, and some that might make Al Gore rich. This led to bad publicity that tarnished the whole program. 

My sense is that Ezra, and David Brooks, give too much weight to Al Gore. A more plausible interpretation, in my view, is that Gore raised the profile of the issue and many conservatives who had been disengaged on climate policy, i.e., who were not aware of the fact that pricing carbon was a politically viable possibility and thus did not invest a great deal of time and effort in opposing efforts to price carbon, decided to enter the discussion. Having followed the climate debate in the early 2000s, I can attest to the fact that support for a carbon tax or cap-and-trade were far from universal on the political right in 2003. 

Implicit in Ezra’s narrative is the notion that it is simply strange that conservatives would oppose efforts to price carbon. Why might conservatives oppose efforts to price carbon? A few possibilities come to mind:

(a) conservatives don’t like taxes;

(b) conservatives are skeptical of environmental regulation;

(c) conservatives in regions that rely heavily on carbon-intensive grid electricity are wary of seeing their electricity bills increase;

(d) conservatives in coal- and oil-producing regions are concerned about the damage carbon pricing might do to their local and regional economies;

(e) and conservatives might be concerned that a national carbon-pricing regime might accelerate the offshoring of carbon-intensive manufacturing.

In fairness, Ezra’s only suggested that “part of” the reason conservatives turned against pricing carbon was disdain for Al Gore. But my sense is that (a)-(e) played a far more significant role. Moreover, Ezra is trying to distill David Brooks’ characterization of how the climate change debate evolved. He does, however, argue that Republicans have been “putting raw partisanship and a dislike for Al Gore in front of the planet’s best interests,” which neglects the possibility that conservative opposition to pricing carbon is intellectually and politically overdetermined and that conservatives believe that (i) it is difficult to divine the planet’s best interests in some abstract sense, given that it is very likely that the planet will outlast humanity, and that (ii) humanity’s best interests are best served by robust global growth, and that adaptation and innovation are preferable to expensive near-term mitigation efforts that might undermine growth prospects.

I recognize that many environmentalists believe that there is no tradeoff between carbon mitigation efforts and global growth, an argument that Jim addresses in his aforementioned essay. Conservatives have tended to be skeptical of this view, and for good reason.  

One idea that is floated from time to time is a revenue-neutral carbon tax that would be used to offset wage taxes, like FICA. Jim addressed this possibility in 2009:

A revenue-neutral carbon tax is superficially appealing. It sounds like something as close to a free lunch as we are offered in this fallen world. But like most free lunches, it turns out to be expensive.

The most important point is that revenue neutrality is most likely a mirage. We would have to maintain the carbon tax for decades in order to generate the consumption reductions that advocates argue will occur, but FICA rates aren’t static over decades. In 1950 the FICA rate was 1.5%; by 1970 it was 4.8%; by 1990 it had risen to its current rate of 7.65%. It has been stable for about two decades, but meanwhile the programs that it (in theory) funds are in crisis.

Over the next few decades, we should expect to be in bitter political fights over changing retirement ages, benefit levels, access to publicly-funded medical care, tax rates, and other measures designed to make these programs financially stable. The FICA rate will not be insulated from this process. Who could possibly say that when it has increased in irregular and unpredictable steps to, say, 15.3 percent between now and 2028 in response to various political crises, that, but for the carbon tax, it would otherwise have been 16.5 percent?

In fact, remember that FICA is theoretically a dedicated funding source for Social Security and Medicare. They are already underfunded. This proposal would massively reduce the collections that support these programs, which would serve to ratchet up exactly the pressure to increase FICA tax rates that will then serve to make this a net tax increase.

The idealized carbon tax is an almost perfect example of what Coase famously called “blackboard economics” — abstract economic theory that proceeds by ignoring a detailed knowledge of the actual economic system. 

Jim’s arguments persuaded me that a carbon tax is not as attractive an idea as environmentalists tend to think, particularly in light of the compromises that would be involved in practice. Like David, however, I wouldn’t rule out a domestic carbon tax, though not for the reason he offers (i.e., to give a boost to green technology). Rather, I think a small carbon tax could be justified on public health grounds. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.